Deciding: Strong Investment Committee

Short Description:
- a member of the team would like to make an investment, a written document goes or a presentation is made to a smaller group within the firm (the investment committee) that has the power to decide if the investment will happen.
Benefits:
- For larger firms, it allows the benefit of finding more deals while maintaining centralized control for senior members and/or founding members of the firm
- With consistent criteria or well-articulated decisions, an investment committee can instill discipline and help apply consistent criteria earlier in the investment decision process.
- Likely to weed out pet projects and low-quality deals.
Trade-offs:
- It can slow down a team to document and then convince more people which could result in missing fast-moving deals.
- Is sometimes criticized for weeding out extraordinary upside, outlier investments that are non-obvious or a little ahead of the market.
Examples:
- Common in PE firms or larger VC firms